I have spotted the biggest bottleneck in "bdiff.c". Actually it was pretty easy to find after I recompiled the python interpreter and mercurial for profiling. In "bdiff.c" function "equatelines" allocates the minimum hash table size, which can lead to tons of collisions. I introduced an "overcommit" factor of 16, this is, I allocate 16 times more memory than the minimum value. Overcommiting 128 times does not improve the performance over the 16-times case.

#!/usr/bin/env python
#
# mercurial - scalable distributed SCM
#
# Copyright 2005-2007 Matt Mackall <mpm@selenic.com>
#
# This software may be used and distributed according to the terms
# of the GNU General Public License, incorporated herein by reference.

# enable importing on demand to reduce startup time
from mercurial import demandimport; demandimport.enable()

import mercurial.dispatch
mercurial.dispatch.run()